Turkish gold reserves rise as FX reserves fall
- Turkey's central bank has accumulated 5.9mn oz of gold ytd (worth US$16bn), its stock is now behind only China & Russia
- Motives could include building buffers, diversifying reserves, defying sanctions, stimulating growth or FX hedging
- FX reserves decline to US$42.4bn as gold reserves rise to US$41.1bn; could signal more TRY weakness ahead
There are many possible reasons for gold accumulation, each with different implications:
To accumulate reserves without directly pressuring the TRY/US$ exchange rate.
To diversify reserves and move away from the US$ amid rising tensions with the West (with conflicts in Azerbaijan, East Med, Iraq, Libya and Syria – see here).
To route gold purchases from Venezuela to Iran in contravention of sanctions, with US officials expressing concerns in early 2019.
To stimulate growth by purchasing gold from residents without sterilising the cash injection (with the government announcing plans to bring more of the alleged 5,000-ton stock of “under the mattress” gold into the banking system).
Resulting from higher domestic production, which is expected to rise 16% yoy this year (with the CBRT holding the right of first refusal to purchase at market prices, currently near the all-time high).
Greater required reserves at the CBRT as residents buy gold and deposit at banks to hedge against TRY weakness (precious metal deposits are up US$15bn ytd but required reserves have only increased by US$1bn, while imports of precious metals rose 221% yoy to cUS$3.5bn in September, indicating a large movement from TRY into gold but little impact on CBRT gold reserves).
- 1 Weekend Reading/Global Vaccine colonialism revisited: World’s most comprehensive data on pre-purchases
- 2 Global Themes/Global Global Investment Themes for 2021
- 3 Strategy Note/Global Emerging-Frontier Equity Monthly – November: Our top picks after the rally
- 4 Strategy Note/Global The ultimate guide to Brazil fintech
- 5 Macro Analysis/Global Emerging market yields reach all-time low
This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...